Recovering Journalist

Local Ad Dollars, Slip Sliding Away

There's a good but depressing article in the Wall Street Journal about how newspapers are continuing to fall behind in the local online advertising derby–even as their print ad revenues are ebbing away. According to Borrell statistics cited in the story, newspaper share of the local online ad market has fallen to 27.4 percent from 35.9 percent two years ago. Things aren't going in the right direction. That's not good–especially when the overall local online advertising market is growing, ahem, at a 57 percent annual clip.

The Journal story lists several reasons for the newspapers' local online advertising problems, unfortunately well-known to anybody who's been around newspaper online ad sales operations:

• It's hard to get sales reps interested in selling less-lucrative local online ads.
• Small local advertisers generally don't buy banner ads favored by larger national advertisers (and still the standard ad on most newspaper Web sites).
• Strategies of bundling print and online advertising may cause more cannibalization than added sales. 
• Local online ad growth is coming from small- and medium-sized business–which traditionally haven't been significant advertising customers of most good-sized dailies.

That last point is particularly interesting. In print and online, most papers, by covering a broad metropolitan area, are more attractive to larger local advertisers like car dealers and banks. Smaller advertisers–the pizza parlors, nail salons, mom-and-pop stores–don't want the broad geographic reach that papers offer, and can't afford the high rates. And they're harder to sell to (and the commissions aren't as large). 

So newspaper sales reps traditionally haven't called on those smaller advertisers. But there are lots of them, and other media are moving in–community papers, local Web sites and blogs, even Google, Yahoo and specialty sites like Yelp. That's what's crowding the newspapers out of their own markets, online.

At Backfence, we saw that there was definite interest by these small merchants and service providers in advertising online on a focused local site. But newspapers, for the most part, still don't have significant offerings of that type. Not only are they not selling the ads, they often don't really have the strong local online products to sell them on. Want to dominate the local online market? Start with a killer local entertainment guide. But most newspaper sites still haven't figured out how to provide readers–and advertisers–with a topnotch local events guide. And hyperlocal coverage, which gives those small local advertisers access to customers nearest to them, is still a pipe dream at most newspaper Web sites.

All of this is quite unfortunate, since newspapers at this point need every ad dollar they can find, and those small local businesses represent a largely untapped pool of potential ad revenue. To get it, newspapers need to really change the way they approach their local market, online. Some suggestions:

• Build a strong local product to attract local advertisers–an entertainment guide, hyperlocal sites, a site targeting a specific local demographic, whatever.
• Push the cost of ad sales down as low as possible. No more high-salary, high-commission sales reps who can only score decent bucks by selling another car dealer ad. Try commission-only telemarketing reps smiling and dialing to blanket small local businesses.
• Self-serve advertising tools. Make it easy–really, really easy–for small advertisers to come online, create, place and pay for an ad. That drives the cost of sales way down. Did I mention it has to be easy? Most newspaper sites haven't mastered that concept for simple things like placing online classifieds, unfortunately.
• Seminars for local businesses on online advertising (see the Bakersfield Californian example in the Journal story). It's still new to many, many small business owners. Educate them on the value of online advertising and how to take advantage of it. 
• Don't sell only your own products. Deploy ad reps with a portfolio of offerings to local businesses that might include ads on Google, Yahoo, or even the Yellow Pages. You've got the feet on the local streets--use them.
• Experiment with new online advertising forms. Banners and tiles aren't the only way to advertise online. In fact, they're quite tired (clicked on a banner ad lately? Anyone? Bueller? Anyone?). Try everything from text ads to interactive ads that couch the ad message in a game or quiz. Sell sponsorships of various elements of the site. And don't forget video ads, which are becoming very popular among local advertisers. Real estate walkthroughs, chefs describing their restaurants–these videos seem obvious, but they're still few and far between on newspaper sites. 

Newspaper competitors online already are doing all of these things. Just as on the news side, too many papers are still trapped in a business and operational model that dates to just after the days of Ben Franklin and John Peter Zenger. Local online advertising represents a significant source of badly needed advertising revenue. Newspapers can't afford to let it slip away.

A Smart Outsider Looks at Newspapers

There's a terrific angry blog about the music industry by a guy named Bob Lefsetz, a former industry executive who delights in pointing out how record companies, led by ossified management, have been totally eclipsed by the Internet and changing technology to the point where they're in danger of going out of business.

Sound familiar?

Anybody who's interested in the music business, or in changing industries, should read Lefsetz regularly. If nothing else, he's great fun–every blog should have his spirit and passion. There's nothing like a good Lefsetz rant.

But today he turns his sights on....the newspaper business. It's the view from an outsider who's a fan of quality news but understands how change can roil an industry. It's well worth a read, with a warning: Lefsetz has nice things to say about Sam Zell's Tribune crowd, including chief innovator Lee Abrams, who came from the radio industry–another business in upheaval that Lefsetz knows well.

Quoth Lefsetz: "The traditional news business is excoriating Lee Abrams. For his endless memos, complaining about his grammar. For his occasional gaffe. And for his new ideas. If those running the newspapers were so damn smart, they wouldn't be in this predicament. Lee Abrams is looking to save their business." He's got a point, similar to something I've said before. Trying something different, even if it seems nutty, is far preferable to stubbornly going down with the ship.

It's a great read, and worth pondering as an outsider's perspective on what some of us have been saying for years about the need for true fundamental change.

Well, It Could Be Worse

Just to bring a small amount of good cheer to bear in the new year, at least in a relative sense, ponder this: While we all know that newspaper circulation and advertising are falling precipitously, the newspaper industry's got nothing on the music business.

Variety reports that CD sales during the holidays—traditionally the industry's strongest sales period—were down a whopping 21 percent. For the full year, CD sales look to be down in the double-digits. Those single-digit advertising and circulation drops don't look so bad now, do they?

There are some troubling parallels between the newspaper and music businesses and their dual decline: technology, changing consumer habits, hubris and sloth are contributing equally to the erosion of both businesses. And they're both desperately in search of a new business model (and product offering) to try to stem the decline. In both cases, ultimately, it may be irreversible: plastic CDs, like print newspapers, are increasingly obsolete, and both have much better digital analogues. (Sorry, I couldn't resist that.)

There's another industry heading for the same technology-induced precipice, as Marc Andreesen points out: DVDs. Online distribution of movies is coming on fast—did you notice last week announcement that Apple will start offering movie rentals via iTunes? A year or two from now, the movie and DVD industry will be another big story of a business struck a mortal blow by the conversion to digital. Wonder if there will be any newspapers around to cover it?